Total’s third-quarter adjusted profit up 32%

Production increases more than 4%

By

AudeLagorce

LONDON (MarketWatch) — Total SA, France’s largest oil company, reported on Friday a 32% increase in adjusted third-quarter profit as the global economic recovery pushed up demand for energy and new projects boosted production.

Net profit in the three months to Sept. 30 increased 47% to €2.83 billion ($3.9 billion), or 1.26 European cents a share.

Adjusted profit, the figure closely tracked by analysts as it excludes changes to the value of inventories and to the group’s stake in Sanofi-Aventis, climbed 32% to €2.48 billion. The result exceeded analysts’ consensus expectations, according to a poll conducted by Dow Jones Newswires, of €2.44 billion. The beat was mostly driven by the upstream division.

Revenue climbed 19% to €40.18 billion, helped by a 13% year-on-year increase in oil prices. Production rose 4.3% to 2.34 million barrels of oil equivalent per day.

Chief Executive Christophe de Margerie said in a statement that the results “confirm the momentum of the past several quarters” and “reflect the quality and reliability of the group’s operations, the profitability of its new production and the improved performance of the Chemicals segment.”

Total
TOT, -0.68%
(FP) shares fell 1.1% in early afternoon trading in Paris. The main French index, meanwhile, dropped 0.6%.

Collins Stewart analysts said in a note to clients that although the results showed good volume growth, they fear Total is approaching a period of slower growth and higher capital expenses.

They forecast that Total’s production would likely grow only 2% in the fourth quarter and recommended switching into Royal Dutch Shell (RDSA)
RDS.A, -1.44%
which they said has much better production growth prospects.

Total on Friday also announced a change in its interim dividend policy. It will move to quarterly payments, instead of semi-annual ones, beginning in September 2011.

Disruption to French refining operations

The strong performance may reassure investors concerned about the severe disruption to Total’s French refining operations over the past month amid nationwide protests over pension reform. Key ports and plants sat idle, leading to serious fuel shortages in some parts of the country.

Total owns six of France’s 12 oil refineries. Several of the plants have re-opened now that the reform bill has passed but clearing the crude backlog could take weeks.

While Total acknowledged the disruptions in its statement on Friday, it did not estimate their cost. Before the strikes, the group had already decided to scale back refining capacity in France.

Competition in the sector is rising with Middle Eastern countries, benefiting from better access to crude stocks, gradually edging ahead. Industry observers also worry that as China and India build new refinery capacity, they will cut imports from European firms.

A strong third quarter for energy firms

Oil companies are generally expected to post very strong results this quarter on the back of higher oil prices and increased demand.

Royal Dutch Shell on Thursday posted a forecast-busting 88% rise in adjusted third-quarter profit while Italy’s Eni (ENI) also reported stronger-than-expected results. BP PLC (BP.)
BP, -1.72%
the oil major still reeling from the impact of its responsibility in the worst oil spill in U.S. history, is due to report results on Tuesday.

Like many of its competitors Total is delving into new countries and new fields to try and increase production and answer the world’s fast-growing energy needs. Last month it said that production from five start-up projects launched in 2009 and other new projects should reach around 800,000 barrels of oil equivalent per day by 2014.

Total also forecast that production would grow in the second half of this year compared to the same period in 2009 and then be broadly flat in 2011 before growth returns from 2012 onwards.

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